SUMMARY: The FDIC has received inquiries regarding the application of
section 27 of the Federal Deposit Insurance Act to State banks
operating interstate branches. This General Counsel's Opinion sets
forth the Legal Division's conclusions regarding where such banks are
``located'' for purposes of section 27; when host state, as opposed to
home state, laws will provide the appropriate interest rates for loans
to customers; how various functions related to making loans to
customers should be defined and the impact that they will have on the
application of a particular state's interest rates to those loans; and
the need for appropriate disclosure of the laws governing the loan to
bank customers.

Section 27 of the Federal Deposit Insurance Act (``FDI Act'') (12
U.S.C. 1831d) \1\ (``section 1831d'') establishes the maximum rates
that insured state-chartered depository institutions and state-licensed
insured branches of foreign banks (collectively, ``State banks'') may
charge their customers for most types of loans. Section 1831d is
patterned after and has been construed in pari materia with section
5197 of the Revised Statutes (12 U.S.C. 85) (``section 85'' of the
National Bank Act (``NBA'')). Like section 85, section 1831d has been
construed to provide State banks with ``most favored lender'' status
and to permit State banks to ``export'' interest charges allowed by the
state where the lender is located to out-of-state borrowers.
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\1\ For the convenience of the reader, the initial reference to
a provision of the FDI Act or interstate branching legislation will
be made to the citation, as enacted, followed by the United States
Code citation. Thereafter, the provision will be referred to by the
section number contained in the United States Code. For example, the
initial citation of section 27 of the FDI Act will be followed by
the United States Code citation (12 U.S.C. 1831d) and the section
will subsequently be referred to as ``section 1831d''.
---------------------------------------------------------------------------

Since the enactment of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, Pub. L. 103-328, 108 Stat. 2338
(1994)(``Riegle-Neal Act'') and the Riegle-Neal Amendments Act of 1997,
Pub. L. 105-24, 111 Stat. 238 (1997) (``Riegle-Neal Amendments
Act'')(collectively, ``Interstate Banking Statutes'') questions have
arisen regarding the appropriate state law for purposes of section
1831d that should govern the interest charges on loans made to
customers of a State bank that is chartered in one state (the bank's
home state) but has a branch or branches in another state (the host
state) (an ``Interstate State Bank''). These questions have not
previously been addressed by the Legal Division. Therefore, this
General Counsel's Opinion sets forth the Legal Division's
interpretation of section 1831d as it relates to the Interstate Banking
Statutes to provide guidance in this area to State banks and the
public.\2\
---------------------------------------------------------------------------

The Riegle-Neal Act established, for the first time, a
comprehensive federal statutory scheme for interstate branching by
state and national banks. In doing so, Congress recognized the
potential efficiencies to be gained by an interstate branch banking
structure as well as the complications that could arise in determining
when an interstate bank should look to the laws of its home

[[Page 27283]]

state or a host state to determine the interest rates that the bank may
permissibly charge its customers.

1. Where May an Interstate State Bank Be Located for Purposes of
Section 1831d?

Section 1831d(a) establishes the maximum interest charges that
State banks may charge their customers for most types of loans. The
interest charges are established by reference to the location of the
lender. The statute provides:

In order to prevent discrimination against State-chartered
insured depository institutions, including insured savings banks, or
insured branches of foreign banks with respect to interest rates, if
the applicable rate prescribed in this subsection exceeds the rate
such State bank or insured branch of a foreign bank would be
permitted to charge in the absence of this subsection, such State
bank or such insured branch of a foreign bank may, notwithstanding
any State constitution or statute which is hereby preempted for
purposes of this section, take, receive, reserve, and charge on any
loan or discount made, or upon any note, bill of exchange, or other
evidence of debt, interest at a rate of not more than 1 per centum
in excess of the discount rate on ninety-day commercial paper in
effect at the Federal Reserve bank in the Federal Reserve district
where such State bank or such insured branch of a foreign bank is
located or at the rate allowed by the laws of the State, territory,
or district where the bank is located, whichever may be greater.
(Emphasis added.) \3\

\3\ The alternative interest rate that is tied to the discount
rate on 90-day commercial paper in effect at the Federal Reserve
Bank is not tied to state law but it, like the rate allowed by state
law, also requires a determination of where the lender is
``located''.
---------------------------------------------------------------------------

While the FDI Act does not specifically address where a lender is
located for purposes of section 1831d, the same reference to interest
rates where the bank is located is contained in section 85 of the NBA,
upon which section 1831d is based.\4\
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\4\ Section 85 states, in relevant part: ``Any association may
take, receive, reserve, and charge on any loan or discount made, or
upon any notes, bills of exchange, or other evidence of debt,
interest at the rate allowed by the laws of the State, Territory, or
District where the bank is located, or at a rate of 1 per centum in
excess of the discount rate on ninety-day commercial paper in effect
at the Federal reserve bank in the Federal reserve district where
the bank is located, . . . .'' (Emphasis added.)
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Prior to the enactment of section 1831d, the United States Supreme
Court recognized that a national bank, pursuant to section 85, could
``export'' interest charges allowable in the state where the bank was
located to debtors domiciled outside the bank's home state.\5\ In
Marquette the Court determined that the national bank was ``located''
for purposes of section 85 in the state designated in its organization
certificate and could charge interest to residents of other states at
rates permitted under the laws of the state so designated.\6\ Section
85 has been recognized to be the ``direct lineal ancestor'' of section
1831d, which was enacted as part of the Depository Institutions
Deregulation and Monetary Control Act of 1980, Pub. L. 96-221, 94 Stat.
132 (1980). Congress made a conscious choice to pattern section 1831d
after section 85 to achieve competitive equality in the area of
interest charges between state and national banks.\7\
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Reading the two provisions in pari materia because of their
historical background, the court in Greenwood determined that section
1831d provided a state bank with the ability to export interest charges
to out-of-state borrowers from the state in which it was chartered
(recognizing the state where the bank was chartered, Delaware, as the
place where the bank was ``located'' for purposes of section 1831d).\8\
Therefore, prior to the enactment of the Interstate Banking Statutes,
the state where a State bank was chartered had been established as the
state in which a bank was ``located'' for purposes of exporting
interest rates under section 1831d(a).
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Following enactment of the Interstate Banking Statutes it is
possible for an Interstate State Bank to make loans to customers either
from the state in which it is chartered or from an out-of-state branch.
Although the courts do not appear to have addressed the issue of
whether an Interstate State Bank may be located for purposes of section
1831d in the state where it is chartered and in each state where it
maintains one or more branches the OCC has recently issued several
Interpretive Letters indicating that an interstate national bank may be
``located'' for purposes of section 85 in the state where its main
office is located, as well as in the state or states where it maintains
branches. See Interpretive Letter Nos. 686, 707, 782 and 822.
Similarly, in my view an Interstate State Bank also may be
``located'' for purposes of section 1831d in its home state and in each
state where it maintains out-of-state branches. There are at least
three reasons for this view. First, the Riegle-Neal Amendment Act's
applicable law clause for State banks 9, discussed in
greater detail below, is an indication of Congress' recognition that
maintaining a branch within a state, except as otherwise provided in
section 1831a(j), constitutes a sufficient presence (i.e., location) in
the state to subject the branch to host state laws, including the host
state's consumer protection laws (which include applicable usury
ceilings). Second, the OCC also has observed, most recently in
Interpretive Letter No. 822, that there is a clear and direct
relationship between section 94 of the NBA, addressing the ``location''
of a national bank for venue purposes, and section 85, addressing the
``location'' of a bank for usury purposes, based upon court decisions
construing the two provisions. The language of section 1831d, which is
based largely upon sections 85 and 86 10 of the NBA, has
been recognized to include judicial interpretations of those
provisions.11 Finally, there is an evident congressional
intent to provide State banks with competitive equality with national
banks in enacting section 1831d 12 and to provide parity
between State banks and national banks in enacting the Riegle-Neal
Amendments Act.13
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\9\ 12 U.S.C. 1831a(j)(1).
\10\ Section 86 of the NBA provides the remedy for violations of
section 85. Section 1831d(b) is the statutory counter-part contained
in the FDI Act.
\11\ See Greenwood, at 827; Hill v. Chemical Bank 799 F. Supp.
948, 952 (D. Minn. 1992) (``Hill'') (``The key language of (section
1831d) is substantially identical to language in sections 85 and 86
of the National Bank Act, the federal usury provisions governing
national banks. Generally, similar language should be interpreted
the same way, unless context requires a different interpretation.
Further, Congress is presumed to be aware of judicial
interpretations of statutory language when it intentionally
incorporates the language of one statute into another statute.'')
\12\ See 126 Cong. Rec. 6900 (1980) (statement of Senator
Proxmire); 126 Cong. Rec. 6907 (1980) (statement of Senator
Bumpers); see also Hill, at 952 (``Given the similarity in language
and clearly expressed intent of Congress to create parity between
state and national banks, (section 1831d) should be interpreted
consistently with sections 85 and 86.'')
\13\ See 143 Cong. Rec. H3089 (daily ed. May 21, 1997)
(statement of Representative Roukema).
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2. If a State Bank is Located in More Than One State, Which State's
Usury Provisions Govern the Loans From the Bank?

Given that a State bank can be located in more than one state, the
next question is what state's usury provisions should govern loans made
by an Interstate State Bank.

[[Page 27284]]

The answer to this question requires reference to the applicable
law and usury savings clauses contained in the Riegle-Neal Act, the
Riegle-Neal Amendments Act, which subsequently amended the applicable
law clause for State banks, and to the legislative history underlying
these provisions.
The Applicable Law Clause for State Banks
With the introduction of nationwide interstate branching, questions
arose as to the appropriate law to be applied to out-of-state branches
of interstate banks. Congress addressed this matter for national banks
in section 102(b)(1) of the Riegle-Neal Act, which amended section 36
of the NBA to add a new subsection (f), which included 12 U.S.C.
36(f)(1)(A)(''the applicable law clause for national banks''), and
addressed this matter for State banks in section 102(b)(3)(B) of the
Riegle-Neal Act, which amended section 1831a of the FDI Act to add a
new subsection (j), which included 12 U.S.C. 1831a(j)(1)(''the
applicable law clause for State banks'').
As originally enacted by the Riegle-Neal Act, the applicable law
clause for national banks provided for the inapplicability of specific
host state laws to a branch of an out-of-state national bank under
specified circumstances, including where Federal law preempted such
state laws for a national bank.14 No similar provision,
however, was contained in the applicable law clause for State
banks.15 This made branches of out-of-state State banks
subject to all of the laws of the respective host state. In contrast, a
national bank operating with branches in various states benefitted from
preemption, and hence greater uniformity than a State bank, with regard
to those host state laws specified in section 36(f)(1)(A) 16
that affected their operations. This led to concerns that the nation's
dual banking system might be jeopardized because State banks might opt
to convert from state to national bank charters to avoid compliance
with a multitude of different state laws in each state in which State
banks wished to operate through interstate branches.
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\14\ Section 36(f)(1)(A)(ii) also provided for preemption of
host state law where the Comptroller determines that state law
discriminates between an interstate national bank and an interstate
state bank.
\15\ Section 36(f)(1)(A)reads in relevant part as follows:
The laws of the host State regarding community reinvestment,
consumer protection, fair lending, and establishment of intrastate
branches shall apply to any branch in the host State of an out-of-
State national bank to the same extent as such State laws apply to a
branch of a bank chartered by that State, except--
(i) when Federal law preempts the application of such State laws
to a national bank * * *
In the context of the law applicable to branches of out-of-state
State banks, however, section 1831a(j)(1) read in relevant part as
follows:
The laws of a host State, including laws regarding community
reinvestment, consumer protection, fair lending, and establishment
of intrastate branches, shall apply to any branch in the host State
of an out-of-State State bank to the same extent as such State laws
apply to a branch of a bank chartered by that State. (Emphasis
added.)
\16\ The reference to ``applicable usury ceilings'' in the
Riegle-Neal Act Conference Report's (``Conference Report'')
discussion of host state consumer protection laws clearly indicates
that the statute's reference to consumer protection laws of host
states included any applicable host state usury ceilings. See H.R.
Rep. No. 651, 103d Cong., 2d Sess., 51 (1994).
---------------------------------------------------------------------------

On June 1, 1997, the interstate branching provisions of the Riegle-
Neal Act became fully effective. Shortly thereafter, on July 3, 1997,
section 1831a(j) was amended by the Riegle-Neal Amendments Act to
revise the applicable law clause for State banks. As amended by the
Riegle-Neal Amendments Act, section 1831a(j)(1) provides:

The laws of a host State, including laws regarding community
reinvestment, consumer protection, fair lending, and establishment
of intrastate branches, shall apply to any branch in the host State
of an out-of-State State bank to the same extent as such State laws
apply to a branch in the host State of an out-of-State national
bank. To the extent host State law is inapplicable to a branch of an
out-of-State State bank in such host State pursuant to the preceding
sentence, home State law shall apply to such branch. (Emphasis
added.) 17

As explained by the legislation's sponsor, Representative Roukema,
the purpose of the legislation was to provide parity between State
banks and national banks. In describing the amendment's effect on host
state consumer protection laws, she indicated:

* * * Moreover, it recognizes the importance of host State laws
by requiring all out-of-State banks to comply with host State laws
in four key areas, community reinvestment, consumer protection, fair
lending, and intrastate branching, unless the State law has been
preempted (with respect to) national banks. In that instance the law
of the State which issued the charter will prevail.18

Therefore, under section 1831a(j)(1), the laws of a host state
apply to branches of out-of-state State banks to the same extent such
state laws would apply to a branch of an out-of-state national bank. If
the laws of the host state would be inapplicable to a branch of an out-
of-state national bank they are equally inapplicable to a branch of an
out-of-state State bank and the home state law will generally apply to
the branch of an out-of-state State bank.19
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\19\ Section 1831a(j)(3)(B), however, requires that the
applicable law clause for State banks not be construed to affect the
applicability of Federal law to State banks and State bank branches
in a home or host state. Therefore, the reference to home state law
in the applicable law clause for State banks may not dictate the
result in all circumstances regarding interest charges on loans to
bank customers if reference to other federal law, such as section
1831d, the usury savings clause, or the rules regarding exportation
of interest charges, would lead to a different result.
---------------------------------------------------------------------------

The Usury Savings Clause
The next question is when the host state interest provisions will
apply to a branch of an out-of-state State bank. For that issue, it is
necessary to consider the Riegle-Neal Act's usury savings clause and
the pertinent portions of the statute's legislative history.
Section 111 of the Riegle-Neal Act (the usury savings clause), was
added to the legislation prior to its enactment by an amendment
sponsored by Senator Roth to address the effect of the Riegle-Neal Act
on sections 85 and 1831d. The amendment was introduced by Senator Roth
in response to uncertainty expressed by the Acting Chairman of the FDIC
and one of the Governors of the Federal Reserve Board regarding the
effect that pending drafts of the interstate banking legislation might
have on the exportation of interest rates by a bank to borrowers
residing in states where the bank also operated an out-of-state
branch.20 See 140 Cong. Rec. S12789 (daily ed. Sept. 13,
1994) (remarks of Senator Roth).
---------------------------------------------------------------------------

\20\ See Nationwide Banking and Branching and the Insurance
Activities of National Banks: Hearings Before the Senate Committee
on Banking, Housing, and Urban Affairs, 103d Cong., 1st Sess. 272
(1993) (Response to Written Questions of Senator Roth from Andrew C.
Hove, Jr.); (Response to Written Questions of Senator Roth from John
P. LaWare), id. at pp. 280-81.
---------------------------------------------------------------------------

The usury savings clause provides, in pertinent part:

No provision of this title and no amendment made by this title
to any other provision of law shall be construed as affecting in any
way--
* * * * *
(3) The applicability of (section 85) or (section 1831d) of the
Federal Deposit Insurance Act. 21

Therefore, Congress did not intend for the Riegle-Neal Act to
affect the applicability of section 1831d to State banks.

[[Page 27285]]

Harmonization of the Applicable Law Clause for State Banks with the
Usury Savings Clause
While the usury savings clause could conceivably be read to
conflict with the language of the applicable law clause,22
reference to the Riegle-Neal Act's legislative history allows the
provisions to be harmonized and placed in proper context.23
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\22\ As enacted by the Riegle-Neal Act, as indicated earlier,
the applicable law clause for State banks made branches of out-of-
state State banks subject to the laws of the host state. Also, as
indicated earlier, concerns had been expressed over the impact that
the application of host state laws regarding consumer protection
might have on the ability of an out-of-state bank to export interest
charges authorized by its home state to a state where the bank
maintained a branch.
\23\ In this respect, the analysis tracks that employed by the
courts. See Weinberger v. Hynson, 412 U.S. 609, 631-32 (1973) (``It
is well established that our task in interpreting separate
provisions of a single Act is to give the Act `the most harmonious,
comprehensive meaning possible' in light of the legislative policy
and purpose. (Citations omitted).''); Dierksen v. Navistar
Internat'l Transportation Corp., 912 F. Supp. 480, 486 (D. Kansas
1996) (``A primary rule of construction of a statute is to find the
legislative intent from its language, and where the language used is
plain and unambiguous and also appropriate to an obvious purpose the
court should follow the intent as expressed by the words used.
(citation omitted). It is the duty of the court, insofar as
practical, to reconcile different statutory provisions so as to make
them consistent, harmonious and sensible. (Citation omitted).
Allegedly repugnant statutes are to be read together and harmonized,
if at all possible, to the end that both may be given force and
effect. (Citation omitted).'')
---------------------------------------------------------------------------

In discussing the usury savings clause, the Conference Report
states:

Section 111(3) specifically states that nothing in Title I
affects sections (85) or (1831d). Accordingly, the amendments made
by the (Riegle-Neal Act) that authorize insured depository
institutions to branch interstate do not affect existing authorities
with respect to any charges under section (85) or (1831d) imposed by
national or state banks for loans or other extensions of credit made
to borrowers outside the state where the bank or branch making the
loan or other extension of credit is located.24 (Emphasis
added.)
---------------------------------------------------------------------------

\24\ H.R. Rep. No. 651, 103d Cong., 2d Sess., 63 (1994).

Senator Roth explained this section of the Conference Report as
---------------------------------------------------------------------------
follows:

The statement of the managers expressly refers to the potential
of a ``branch making the loan or other extension of credit * * *''
This language underscores the widespread congressional understanding
that, in the context of nationwide interstate branching, it is the
office of the bank or branch making the loan that determines which
state law applies. The savings clause has been agreed to for the
very purpose of addressing the FDIC's original concerns and making
clear that after interstate branching, section (85) and section
(1831d) are applied on the basis of the branch making the
loan.25
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\25\ 140 Cong. Rec. S12789 (daily ed. Sept. 13, 1994).

According to Senator Roth, for purposes of determining where a loan
is ``made'' the managers of the Conference Committee recognized that in
the new interstate banking environment banks with a branch or branches
in other states could involve those branches in some but not all
aspects of a loan transaction without the state law where the branch
was located becoming applicable to the loan. In explaining the
provisions Senator Roth distinguished ``ministerial functions''
26 from other functions (subsequently referred to as ``non-
ministerial functions'' 27) related to the loan. To further
explain the importance of these distinctions, in the context of the
appropriate state law to apply to an interstate bank loan, Senator Roth
indicated:
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\26\ These include providing loan applications, assembling
documents, providing a location for returning documents necessary
for making a loan, providing loan account information, and receiving
payments.
\27\ The non-ministerial functions are the decision to extend
credit, the extension of credit itself, and the disbursal of the
proceeds of the loan.

(It) is clear that the conferees intend that a bank in State A
that approves a loan, extends the credit, and disburses the proceeds
to a customer in State B, may apply the law of State A even if the
bank has a branch or agent in State B and even if that branch or
agent performed some ministerial functions such as providing credit
card or loan applications or receiving payments.28
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\28\ 140 Cong. Rec. S12789-12790 (daily ed. Sept. 13, 1994).

Senator Roth's comments, considered in the context of the
applicable law clause for State banks, are indicative of congressional
intent to recognize a parallel between existing law and the law that
should be applied if a loan was made in a branch or branches of a
single host state. Existing law already recognized the effect of home
state law on the state laws of a borrower's residence when loans were
made by national banks and State banks, respectively, to out-of-state
borrowers. In the context of interstate branching, however, Congress
intended to strike a balance between the application of host state and
home state interest provisions by applying the same exportation
principle previously recognized by the courts to loans made in a host
state because the three non-ministerial functions occurred in a branch
or branches of the host state.
Therefore, under the Riegle-Neal Act's usury savings clause the
ability of an out-of-state State bank to export the interest charges
that are permissible in the home state are preserved, even if a branch
or branches of the same bank is located in the same state as the
borrower. If all of the non-ministerial functions involved in making
the loan are performed by a branch or branches located in a host state,
however, the host state's interest provisions should be applied to the
loan.
Non-Ministerial Functions Occur in Multiple States or Outside of
Banking Offices
There are some situations that are not addressed by the Interstate
Banking Statutes. These include loans where the three non-ministerial
functions occur in different states or where some of the three non-
ministerial functions occur in an office that is not considered to be
the home office or branch of the bank (collectively, ``banking
offices''). The OCC recently addressed these issues in Interpretive
Letter 822. With regard to loans where the three non-ministerial
functions occur in banking offices located in different states and the
loans cannot be said to have been ``made'' in a host state under the
criteria discussed in the legislative history of the Riegle-Neal Act,
the OCC concluded that the law of the home state could always be chosen
to apply to the loans because such a result will avoid throwing
``confusion'' into the complex system of modern interstate banking by
having no rate to apply and because the bank is always the lender,
regardless of where certain functions occur.
The other situation addressed in Interpretive Letter 822 is where
any of the non-ministerial functions occur in a host state but not in a
branch. This could occur, for example, where a loan is approved in a
back office but the proceeds of the loan are disbursed in a branch in a
host state.
In these and similar situations, the OCC concluded that home state
rates may be used. Alternatively, in those situations the interest
rates permitted by the host state where a non-ministerial function
occurs may be applied, if based on an assessment of all of the facts
and circumstances, the loan has a clear nexus to the host
state.29
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\29\ The non-ministerial functions, according to Senator Roth's
discussion of the Conference Report, are factors to be considered in
determining which state's law should be applied to a loan. See Roth
statement, at S12789:
The rationale for this conference amendment (substituting loan
servicing for disbursal of loan proceeds in the agency authority
contained in section 101) is that the actual disbursal of proceeds--
as distinguished from delivering previously disbursed funds to a
customer--is so closely tied to the extension of credit that it is a
factor in determining, in an interstate context, what State's law to
apply. (Emphasis added.)

I agree with the OCC Chief Counsel's analysis on these issues and
her observations in Interpretive Letter 822 regarding the significance
of an appropriate disclosure to customers that the interest to be
charged on the loan is governed by applicable federal law and the law
of the relevant state which will govern the transaction.
The Non-Ministerial Functions
The OCC identified three non-ministerial functions for national
banks in Interpretive Letter No. 822 based upon the Riegle-Neal Act's
legislative history. An inquiry is required to determine the location
where each of the non-ministerial functions occur. Briefly stated, the
OCC determined that ``approval'' (i.e., the decision to extend credit)
occurs where the person is located who is charged with making the final
judgment of approval or denial of credit, and the site of the final
approval is the location where it is granted. ``Disbursal'' means
actual physical disbursal of the proceeds of a loan, as opposed to the
delivery of previously disbursed funds to the customer. Disbursal can
occur in various ways, including delivery to the customer in person or
crediting proceeds to the customer's account at a branch, but does not
include delivering the funds to an escrow or title agent who, in turn,
disburses them to the customer or for the customer's benefit.
``Extension of credit'' means the site from which the first
communication of final approval of the loan occurs.
While the need for such inquiries as to non-ministerial functions
may not be initially apparent, I believe that Senator Roth's
distinction for purposes of the ``disbursal'' function between ``the
actual disbursal of proceeds'' and ``delivering previously disbursed
funds to a customer'' is indicative of the type of inquiry Congress
intended in order to identify non-ministerial functions which effect
where a loan is made for purposes of determining the state law to be
applied to a loan. The same definitions should be equally applicable to
State banks under section 1831d.

Conclusion

An Interstate State Bank can be ``located'' for purposes of section
1831d in the state in which it is chartered, as well as the states
where the bank's out-of-state branch or branches are located. The
Interstate Banking Statutes do not affect the ability of an Interstate
State Bank to export interest rates on loans made to out-of-state
borrowers from that bank's home state, even if the bank maintains a
branch in the state where the borrower resides. If an out-of-state
branch or branches of an Interstate State Bank in a single host state
performs all the non-ministerial functions (approval of an extension of
credit, extension of the credit, and disbursal of loan proceeds to a
customer) related to a loan, it ``makes'' the loan to the customer for
purposes of the Interstate Banking Statutes and the loan should be
governed by the usury provisions of the host state. If the three non-
ministerial functions occur in different states or if some of the non-
ministerial functions occur in an office that is not considered to be
the home office or branch of the bank, then home state rates may be
used. Alternatively, in those situations the interest rates permitted
by the host state where a non-ministerial function occurs may be
applied, if based on an assessment of all of the facts and
circumstances, the loan has a clear nexus to the host state. To avoid
uncertainty regarding which state's interest rates apply to a loan
Interstate State Banks should make an appropriate disclosure to the
customer that the interest to be charged on the loan is governed by
applicable federal law and the law of the relevant state which will
govern the transaction.
Authorized to be published in the Federal Register by Order of the
Board of Directors dated at Washington, DC, this 9th day of May, 1998.